Month: March 2023

Blockchain might be the most hyped technology relatively few people understand or actively use.

Its earliest and perhaps most famous use – the cryptocurrency bitcoin – has become a household word, with other digital-currency companies such as Ethereum and Cardano gaining traction in the public consciousness and with investors.

Despite wild price volatility and scams that the United States’ Federal Trade Commission says cost 7,000 people more than US $80 million between October 2020 and March 31, 2021, the crypto economy keeps rolling along, with market capitalization topping $2.4 trillion in May 2021, up from around $200 billion in 2019. And according to a 2021 Fidelity study, seven in 10 institutional investors expect to buy or invest in digital assets in the future.

But financial applications are just part of the hyped potential for blockchain. Boosters of the technology point to other uses such as securing medical data, tracking supply chains, facilitating votes and protecting personal-identity security.

Blockchain, however, still faces hurdles before it can be the game-changer it’s been promising to be since the 2009 debut of bitcoin.

Blockchain is a platform to store and transfer information in a way that is virtually impossible to change without other users knowing. It is secure because it is decentralized and its content is hashed. Users issue transactions to a public ledger that is managed and verified by a network of computers (called miners) without a third party such as a government, bank or other institutional intermediary getting involved.

A group of verified transactions is called a block, and the blocks are linked by complex puzzles solved by computers(“miners”) which verify the transaction and are rewarded for their efforts. Any retroactive change to the log invalidates each block that follows. The result is a certified, transparent, decentralized, tamper-proof database or ledger.

There are difficulties on the way to blockchain world domination, however.

Perhaps the first hurdle to the Age of Blockchain, as Jesse Frederik of the Correspondent asked in 2020, is whether blockchain is a solution in search of a problem. In other words, are the problems expected to be addressed by blockchain projects better suited to solutions we already have?

But hold up, says Dragan Boscovic, research professor and co-director of the School of Computing, Informatics and Decision Systems Engineering at Arizona State University. Blockchain may need to evolve and improve, but it’s viable, solves real-world problems and is on a well-trod path to large-scale adoption.

”It is rather a common technology evolution, the same way you would upgrade from your iPhone 11 to iPhone 12 or 13,” Boscovic tells KUST Review. “There are numerous examples of blockchain technology being deployed to solve practical problems: One example is the (IBM) Food Trust solution for the food-supply chain.” (See sidebar.)

Also, says Dr. Ramesh Ramadoss, co-chair of the Institute of Electrical and Electronic Engineers’ Blockchain Initiative, it’s important to note that “blockchain” isn’t a monolith. It refers to a collection of various distributed ledger architectures. “Different architectures are used in different applications,” he tells KUST Review, “so, it’s very challenging to make a general statement about the actual usage or maturity level of the field.”

Another issue is that blockchain can have a heavy carbon footprint.

According to the Harvard Business Review, Bitcoin alone consumes around 110 terawatt hours per year – 0.55 percent of the world’s energy production. Together, Ethereum and Bitcoin annually eat up the same amount of energy as the residents of Belgium and Thailand, respectively, Digiconomist’s Ethereum Energy Consumption Index reports.

And each Bitcoin transaction, regardless of how big or small, represents $176 in electricity to power the mining, according to UK financial site MoneySuperMarket.

The technology needs the resources, but the industry is already beginning to correct itself, Boscovic says, noting “Ethereum 2.0,” which completed its long-awaited merge in September 2022. The initiative promises to reduce its energy usage by 99 percent and be “more scalable, more secure and more sustainable.”

And energy consumption for private blockchains, however, is generally not an issue, Ramadoss notes.

Still, “blockchain by its design needs to have access to a large pool of distributed resources,” ASU’s Boscovic adds. “It is from there that it is able to extract value by enabling independent validation and real-time auditing of the transactions enacted across these resources. Initial blockchain solutions made great strides in improving their scalability and throughput (e.g. speed of transaction) as well as energy efficiency. Cardano network is (another) example of new blockchain design that scales well and exhibits great energy efficiency.”

A feature for many users is blockchain’s anonymous transactions, which is fine if you just don’t want anyone to know you’re really into collecting rare My Little Pony figurines, but it becomes a problem when that anonymity is used to launder money or for other nefarious ends.

But just because you don’t have to show ID doesn’t mean transactions are really anonymous. Identities can be tracked if you care to look hard enough, Boscovic says: “Blockchain is a rich source of digital information. With the right digital forensic tools, it is relatively easy to link a specific person to their digital identity used to transact on the blockchain.”

The FBI followed that sort of forensic trail after cyber attackers hit the Colonial Pipeline in May 2021, shutting down the American oil-pipeline system and demanding a ransom of 75 bitcoin (about $2.8 million at the time), Boscovic notes. Most of the ransom (63.7 bitcoin) was recovered; the US government in November offered a $10 million bounty for information about DarkSide, the hacking group believed to be responsible.

Of course, as law enforcement becomes more tech-savvy, users will find new ways to cover their electronic trails. The IEEE’s Ramadoss points to blockchains such as Monero and Zcash that were designed with privacy in mind and are much more difficult to trace.

So what does a blockchain future look like? International regulation might not be a part of the puzzle. Ramadoss thinks such agreements might be extremely difficult given the fragmented nature of the global regulatory landscape.

“Crypto regulation varies from country to country,” he says. “Some countries are favorable (Singapore, El Salvador, Ukraine, Malta), some countries are working on a new regulatory framework (European Commission), and some countries outright banned cryptocurrencies (China).”

And ASU’s Boscovic sees no need for international agreements in principle. “Blockchain solutions are international and borderless by their designs,” he says. “Rather, the national regulators will need to interpret and map international blockchain business opportunities onto local business ecosystems and help their economies be competitive in such a global environment.”

The experts disagree, however, on which regions are leading the way to a blockchain future. Ramadoss is betting on China (for non-crypto technology), which has been piloting the blockchain-based Digital Yuan project, and the European Union, whose European Commission “is funding the European Blockchain Services Infrastructure (EBSI) to serve as a single platform for issuance of identity, diplomas management, notarization of documents and trusted data sharing among the EU member states.”

Boscovic, however, puts his money on North America. “It is primarily due to the entrepreneurial spirit of the young generation, its sharp focus on the global economy and easy access to the capital markets. Europe and Singapore are not far behind.”

But both agree that the confusing nature of the technology isn’t a problem at all. Just as most people don’t have to understand exactly why the internet works to use it, blockchain users will access the technology through user-friendly apps, they say. And the blockchain future? When will it finally arrive? “It’s already here,” Boscovic says.